Yes, Senator Cruz, Elon Musk should read Mises’s Bureaucracy

On his podcast “Verdict” November 13, Ted Cruz mentioned one of my favorite books by Ludwig von Mises: Bureaucracy. He mentioned it in reference to the “Department of Government Efficiency” that was also announced by President-elect Donald Trump on the same day. Cruz brings up a crucial point to the conversation surrounding this plan, pointing at Mises for getting it right. The idea lingers that this Department will make government efficient; that is why you need two businessmen—Elon Musk and Vivek Ramaswamy—at the helm.

At a surface level, this idea is compelling, but a closer examination shows that it runs into roadblocks. That roadblock is Ludwig von Mises and his analysis of socialism. Mises’s theory of socialist calculation put an end to the debate over socialism, but it reaches just as much into bureaucracy. To really grapple with what Senator Cruz is sharing about Mises, we need to ask ourselves why businesses are efficient and then ask why the government is not? Mises answers both of these questions.

Why Do Businesses Succeed (or Fail)?

Mises’s Bureaucracy is a rather short text and is a hidden gem in Mises’s collection. He takes his famous theory of the impossibility of socialist economic calculation and grafts it onto bureaucracies. To understand this we first should ask ourselves what are bureaucracies and what aren’t bureaucracies?

Mises addresses this problem quickly. “Bureaucracy”—even in 1944 when Mises wrote this book—was used arbitrarily as a slur against general inefficiency. Corporate affairs? They were dubbed “bureaucracy” by progressives. Governments? Well, conservatives called those “bureaucracies” too. Mises clarifies that businesses—unlike the mentality of the progressives—cannot be “bureaucratic” in the sense it is popularly used. Businesses are naturally efficient. Led by entrepreneurs with a vested interest through ownership, businesses pursue profit. Profit isn’t an aberration of exploitation but rather a demonstration that the use of resources creates value for others.

Exchange only occurs (short of violence) when the actors in the exchange have a double inequality of valuation—both sides of the exchange believe they are receiving more value from the object they are obtaining than what they give up. Through this process—alongside the help of a medium of exchange (money)—we get market prices and economic calculation.

Economic calculation is the core of the market economy. It is the ability to gauge whether the deployment of land, labor, and capital has been beneficial to society is the essential function of the market-price system. This is why businesses have the ability to be efficient. Businesses are able to gauge whether their actions—as well as the actions of managers or their employees—are profitable. Mises praises double-entry bookkeeping for this reason. Double-entry bookkeeping allows for the entrepreneur to view various factors and learn whether they are lending to the general profitability of the venture. Management must—on the risk of losing their job, if not everyone’s—seek out the most efficient and profitable means for operating. This is hardly bureaucratic.

Businesses are not omnipotent, of course, but the market system largely solves this problem. Entrepreneurs and managers who continually make poor judgements of future conditions are quickly flushed from these positions. They suffer losses and must liquidate their poor investments. Those more successful at sleuthing out future conditions through their general knowledge and anticipations are rewarded with profits.

Businesses are, thus, efficient! This isn’t the so-called bureaucracy of contemporary slang. It also isn’t Mises’s bureaucracy. Then, what is a bureaucracy?

Bureaucracies and Why They Fail

Mises has a distinct definition. He defines bureaucracy as “the method applied in the conduct of administrative affairs the result of which has no cash value on the market.” What he means is that a bureaucracy is not a form of management. It isn’t even necessarily a structure. It is a trait of firms and agencies that do not have the ability to engage in proper economic calculation. They either do not, or cannot, seek profit.

Without profit, a bureaucracy cannot be efficient. This gets to the core of Mises’s socialist calculation problem. Mises concedes—for the sake of the argument—that so-called central planners could be benevolent and be imbued with knowledge of technological possibilities with the resources at hand. But, without the ability to engage in economic calculation of factors of production, they will have no idea whether they have engaged in malinvestment or waste. Are they producing too much or too little? Are they going to the right place? Is X method more efficient than Y method? These questions cannot be answered without economic calculation.

Bureaucracies suffer the very same problem. These agencies are given some ideal other than profit and have no gauge for efficiency. This is necessarily the core method of government, as Mises argues. Government does not operate for profit and lacks the ability to do so, even if they wanted to do so.

Take the Post Office for instance. The United States Postal Service is notoriously sloppy and inefficient. On the other hand, UPS and FedEx are celebrated as far more efficient. What causes this difference despite the similarity of their services? The USPS does not work to earn a profit. Their modus operandi is simply transporting mail that they are given a monopoly over. Their only goal is to do this task that is assigned by government edict and often constrained by the very same. The bureaucrats in them have no means to determine whether they are profitable or not. Even the small modicum of revenue brought in are fees rather than market prices.

Bureaucracy is not a thing of business, but rather government. Government services and agencies have no gauge for profitability and, as a result, no gauge for efficiency. How does one calculate where to allocate efficiently police, or the IRS, or immigration, absent of market prices? This leaves government groping around in a dark room with no information that tells them where they are: until they run into a wall.

The Businessman & Bureaucracy

Can a savvy businessman fix a bureaucracy? Can they apply the methods of a successful business to a government agency to make it more successful? The idea is appealing at first: after all, why couldn’t a more efficient person fix the government? Unfortunately, this misses the core problem with government efficiency. The issue of government efficiency is not one of personage and their knowledge. The issue is one of the system in which they operate. Mises clarifies:

The quality of being an entrepreneur is not inherent in the personality of the entrepreneur; it is inherent in the position which he occupies in the framework of market society. A former entrepreneur who is given charge of a government bureau is in this capacity no longer a businessman but a bureaucrat. His objective can no longer be profit, but compliance with the rules and regulations. As head of a bureau he may have the power to alter some minor rules and some matters of internal procedure. But the setting of the bureau’s activities is determined by rules and regulations which are beyond his reach.

The system of a bureaucracy is not one of profit and loss, and the methods of an entrepreneur cannot operate there. Mises continues in the same section:

In the field of profit-seeking enterprise the objective of the management engineer’s activities is clearly determined by the primacy of the profit motive. His task is to reduce costs without impairing the market value of the result or to reduce costs more than the ensuing reduction of the market value of the result or to raise the market value of the result more than the required rise in costs. But in the field of government the result has no price on a market. It can neither be bought nor sold.

While it is well-meaning to desire greater efficiency in the systems through which we must operate; we encounter a problem that cannot be solved by changing the men inside them. No swapping around of policies, personnel, and processes can make government work better, because those have no measurement mechanism in profit or loss. Government is by the code, not by the consumer. It lacks a way to efficiently allocate labor, land, or other resources because it lacks economic calculation. An entrepreneur doesn’t operate in these conditions.

Senator Cruz sums it up well: “All of your incentives [in government] not only are they not aligned on the profit motive, they are exactly the opposite of the profit motive. So I actually recommended Elon, he read the book.”

Government in of itself can never be efficient, it can only get moved out of the way of what brings real efficiency—entrepreneurs like Elon and Vivek. The best way to bring efficiency to America is to heed Mises’s warnings and just get rid of bureaucracies. I hope Elon Musk takes the time to read this book by Mises, as it is a perfect encapsulation of everything that is wrong with government. To make America efficient again, we need to make America non-bureaucratic again.

Get a copy of or read Mises’ Bureaucracy here!

Originally Posted at https://mises.org/

zerohedge
Economics , News , Politics , Science
December 7, 2024
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The Miserable Cost Of An Open Border

Authored by Seth Barron via RealClearPolitics,

The Biden-Harris experiment in dissolving the U.S. border has wrought massive changes to American society, most of which will not be understood for years, if not decades. Since 2021, U.S. border officials have had at least 10 million “encounters” with migrants, many of whom were allowed to enter the country. There is no telling how many more aliens entered the country without encountering enforcement agents. The population of the United States may have increased by as much as 15 million people in just a few years.

This massive flow of humanity crosses multiple national borders, involves every mode of transportation, accounts for billions of dollars paid in fees to smugglers, and describes a fantastically complex economy of suffering and hope. In an effort to get a handle on this human tide, noted muckraker James O’Keefe – known for his hidden camera “gotcha” interviews with abortionists, media executives, progressive nonprofit executives, and other degenerate types – traces the migrant onrush from its source, and seeks to trace the machinery of profit and influence that is conducting it from great removes.

“Line In The Sand,” the resulting documentary, is a remarkable and humane exposition, revealing perspectives and images American audiences have mostly been prevented from seeing. O’Keefe and his intrepid team begin on the U.S. side of the Mexican border, where we witness migrants crossing the border through holes that their guides have cut in a fence that serves as a target as much as a barrier. Infrared cameras show dozens of illegal aliens streaming toward “pick-up” vehicles on the U.S. side while smugglers – presumably cartel members – a few feet away taunt O’Keefe and his group. “What if I were to run up to them right now, what would happen?” O’Keefe asks his guide. “I would highly advise you against that,” he is told, in a classic understatement.

The fact that coyotes and other human traffickers are paid to assist northbound migrants with their passage is no scandal; we all know what their motivations are and why they are doing what they do. But O’Keefe documents multiple examples of U.S. Border Patrol agents standing idly by while illegal aliens cross, virtually under their noses. “Why aren’t you doing anything?” he asks. “Have a good day, guys,” a border agent desultorily responds before driving off in the general direction of the episode. Later, a migrant stands in front of a Border Patrol truck, clearly trying to alert the agents of his intention to surrender, but is studiously ignored until O’Keefe and his team call their attention to him.

There is a kind of sad comedy in the operations of U.S. border security, and O’Keefe is not unsympathetic to the absurd position that border agents have been put in. Trained to defend the national border and to serve as the first line of defense of American soil, these agents have been recommissioned as a perverse Welcome Wagon for illegal aliens, charged with making their undocumented and uninvited entrance to the United States as commodious as possible.

Looking to get deeper into the heart of this migratory avalanche, O’Keefe went deep into Mexico, to the city of Irapuato, about 150 miles northwest of Mexico City. Irapuato is a popular railway junction where thousands of migrants climb aboard “La Bestia,” or “The Beast,” a cargo train that chugs northward toward the United States. In the film’s most remarkable footage, O’Keefe and his team join with migrants, mostly from South and Central America, to ride The Beast, also known as “el Tren del Muerto,” or the Train of Death. O’Keefe talks to the migrants without condescension, asking them their destinations and what they plan to do when they get there, and their concerns about the perilous nature of the journey. We see the film crew race to jump on a moving train and clamber on top to sit in a pile of coal; O’Keefe is shocked at how truly dangerous this small element of the trip is and sympathizes with the migrants’ difficult choices. These scenes are among the film’s most affecting, along with the crew’s random encounter with a little girl who had just crossed the border after journeying from Guatemala by herself. There is a human dimension to illegal immigration, and O’Keefe does not ignore it.

However, there is also an impersonal dimension to this massive population transfer, and O’Keefe determinedly aims to uncover it – to put a face to the institutions and administrators that benefit from the rough injection of millions of people into American society. From government agents to bus companies to nonprofit resettlement groups to private contractors running huge, walled compounds housing thousands of children, O’Keefe doggedly tries to penetrate the mechanics of a system that resolutely hides itself behind a screen of silence, usually in the name of “safety” and “privacy.”

Some of the film’s more comical moments pertain to these segments, such as when the team follows some just-arrived Chinese migrants in San Diego to an employment agency, where other Chinese aliens, already in the country for several months, complain that it’s much harder to live in the United States than they had imagined. O’Keefe tries to sniff out a connection between the owner of the agency and more powerful actors, but it emerges that there really isn’t much going on; in fact, the owner asks O’Keefe if he knows of a way to apply for government grants.

Elsewhere, O’Keefe tries to get information about the operations of several huge residential centers for unaccompanied minors and tries to spin their refusal to give him access to the centers or submit to interviews as evidence of the existence of vast, government-funded child sex trafficking networks. But it seems more likely, though no less troubling, that the open borders policy of the last four years has created a tremendous humanitarian crisis of alien children roaming the continent by themselves, and the government is probably trying to keep them from becoming prey to sex traffickers while they sort out where to send them. Though O’Keefe does not uncover a salacious network of child predators, his vigorous pursuit of the truth does reveal the existence of a large, shadowy, government-funded, and lucrative system of child “welfare.”

So, “Line In The Sand” is correct in the larger sense that billions of dollars are being spent managing this human flow, and many people are getting rich off of it. The last thing these parasitical administrators of the nonprofit industrial complex want is for the border to close. O’Keefe does a great job of capturing in real time the corruption of a local New York City nonprofit called La Jornada, whose leader, Pedro Rodriguez, evidently perpetrates fraud, demanding fees for services that the city provides for free. O’Keefe also sends a Spanish-speaking reporter undercover into the Roosevelt Hotel, New York City’s main processing center for newly-arrived migrants, which offers him free housing, medical care, and even airplane tickets, even though the reporter explains that he has no identification of any sort. How, O’Keefe asks, in our post 9/11 security-obsessed era, are we to make sense of a system that admits millions of unvetted foreigners into the country, and then offers to fly them anywhere they care to go?

“Line In The Sand” is rough in parts, but intentionally so. Its subject is so sprawling and tangled that a neat and clean representation would be a lie. Even with a nine-figure budget – which this film assuredly did not have – a documentary about the border and the 30 million-footed human swarm that has crossed it would be messy and incomplete. But James O’Keefe and his small team have done something remarkable. They have taken on the decade’s biggest story, given it form, and preserved the humanity of its subjects. It is worth watching.

Seth Barron is a writer in New York and author of the forthcoming “Weaponized from Humanix.”

Tyler Durden
Sat, 12/07/2024 – 17:30